How to Start a Business in Texas

Everything’s bigger in Texas—including the opportunities for business owners. With no state income tax, a booming economy, and a business-friendly regulatory environment, Texas is one of the best places to start and grow a company. But turning an idea into a thriving business takes more than just ambition—it requires careful planning, strategic funding, and an understanding of state-specific regulations.

No matter your industry, this guide will walk you through the essential steps to start a business in Texas. From choosing the right business structure to securing funding and navigating permits, we’ll help you lay the groundwork for long-term success.

Understanding Business Structures in Texas

Before you can open your doors for business in Texas, you’ll need to decide on the right legal structure. The business structure you choose will impact everything from your liability to your taxes and daily operations. Texas offers a range of business entity options, but the right one for you depends on your goals, risk tolerance, and financial strategy.

Choosing an LLC in Texas

A Limited Liability Company (LLC) is a popular choice for entrepreneurs who want personal asset protection without the formalities of a corporation. An LLC separates your personal and business finances, meaning you won’t be personally liable for business debts. It also offers pass-through taxation, so profits go directly to the owners without corporate taxes. LLCs are ideal for Texan small business owners, freelancers, and partnerships looking for liability protection and tax advantages with minimal paperwork.

Sole Proprietorships in Texas

A sole proprietorship is the simplest business structure. It requires no formal registration beyond basic licensing. The owner and the business are legally the same, meaning personal assets aren’t protected from business liabilities. However, taxes are easy because all business income is reported on the owner’s personal tax return. Sole proprietorships are best for independent contractors, freelancers, and low-risk businesses that don’t need liability protection or complex tax structures.

Corporations in Texas

A corporation (C Corp or S Corp) is a separate legal entity that provides strong liability protection and makes it easier to raise capital through investors. C Corps faces double taxation (corporate and personal taxes on dividends), while S Corps allows profits to pass through to shareholders’ tax returns. Corporations are ideal for businesses planning to scale, attract investors, or eventually go public.

Essential Steps to Establish a Business in Texas

From registering your business to understanding tax obligations and zoning laws, making sure you’re compliant from the start will set you up for success. Below, we’ve outlined everything you need to know to establish your business in the Lone Star State.

Registering Your Business with the Texas Secretary of State

Before you can officially operate in Texas, you need to register your business with the Texas Secretary of State. The exact process depends on your business structure:

• • LLCs and Corporations must file a Certificate of Formation online through the SOSDirect portal.
  • Sole Proprietorships don’t require state registration but may need a DBA (Doing Business As) name if operating under something other than your legal name.
  • Partnerships should register based on whether they are general, limited, or limited liability partnerships.

Once registered, your business will receive a Texas Taxpayer Number that allows you to handle tax and regulatory compliance.

Obtaining an EIN and Understanding Franchise Tax

An Employer Identification Number (EIN) is a must for tax purposes, even if you’re a solo business owner. This unique number, issued by the IRS, is used for filing taxes, opening a business bank account, and hiring employees. You can apply for an EIN for free through the IRS website in just a few minutes.

Texas also has a franchise tax for businesses earning over a certain revenue threshold. However, small businesses with less than $2.47 million in total revenue (as of 2024) are exempt. If your business surpasses this amount, you’ll need to file an annual franchise tax report with the Texas Comptroller of Public Accounts.

Navigating Zoning Laws and Permits

Every Texas city and county has unique zoning laws that dictate what type of business can operate in certain areas. Before leasing or buying property, check with your local zoning office to confirm compliance.

Depending on your industry, you may also need specific permits and licenses. For example:

• • Retail & restaurants: Health permits, food handling licenses
  • Construction & trade services: Contractor licenses, building permits
  • Home-based businesses: Special zoning approvals, HOA permissions

The Texas Business Permits & Licenses Guide or the guides and resources offered by the Texas Secretary of State website can help you determine which licenses apply to your industry. Ensuring you have the right approvals will prevent costly delays and legal issues down the line.

Financial Planning and Resources: Alternative Funding Solutions

To start and grow a business in Texas, you need to create a financial plan. Securing funding is often one of the biggest challenges, especially for new businesses that may not qualify for traditional bank loans. Fortunately, alternative funding solutions offer faster, more flexible capital to help entrepreneurs get off the ground.

Creating a Business Plan and Financial Roadmap

A strong business plan is a critical tool for securing funding. Lenders and investors want to see a clear vision backed by solid financial projections. Your plan should include:

• • Revenue projections: How will your business generate income?
  • Startup costs: What do you need to cover equipment, inventory, and overhead?
  • Break-even analysis: How long will it take to become profitable?
  • Funding strategy: What financial resources will you leverage?

Having these details laid out will help attract funding and keep you on track as your business grows.

Exploring Alternative Funding Options

Traditional bank loans come with strict requirements, long approval times, and rigid repayment structures that can be challenging for startups and small businesses. That’s why many Texas entrepreneurs turn to alternative funding solutions like revenue-based financing (RBF). RBF provides funding based on your future revenue. It offers:

• • Flexible payments: Payment terms on a daily or weekly schedule, tailored to fit your company’s needs.
  • Fast access to capital: Approval process takes between 1 and 3 business days, and once the funding agreement has been signed, funds are disbursed to the business bank account within 1 business day.
  • Growth-friendly terms: Funding is designed to scale with your sales, making it a practical solution for businesses in need of working capital.

At Mantis Funding, we specialize in providing fast, flexible financial solutions for businesses that need working capital without the hassle of a traditional loan. Whether you need funds for equipment, marketing, or day-to-day operations, our revenue-based financing model lets you access the cash you need when you need it.

Utilizing the Texas State Comptroller’s Office

Understanding state tax obligations is crucial for financial planning. The Texas State Comptroller’s Office provides key resources for businesses, including:

• • Sales & Use Tax Permits: Required for businesses selling taxable goods or services. You can apply online through the Comptroller’s website.
  • Franchise Tax Guidance: If your business earns over $2.47 million in annual revenue, you must file a franchise tax report.
  • Tax Exemptions & Deductions: Various business expenses may qualify for tax savings.

Staying compliant with Texas tax regulations ensures you avoid penalties and keep your business running smoothly.

Setting Up Operations and Growing Your Business

Starting a business is one thing—keeping it running smoothly is another. Hiring the right team, meeting legal requirements, and using smart technology can make all the difference in how your business operates. Handling these key aspects early will save you time and money in the long run.

Hiring, Reporting, and Compliance

Bringing on employees? Texas has specific compliance requirements that every business owner needs to follow:

• • Registered Agent Requirement: If you’ve formed an LLC or Corporation, you’re required to designate a registered agent—a person or service responsible for receiving legal and tax documents on your behalf. This ensures you never miss important filings or deadlines.
  • Employer New Hire Reporting: Texas employers must report all new hires to the Texas Workforce Commission within 20 days of hiring to comply with state employment laws. This helps track wage garnishments and unemployment benefits.
  • Workers’ Compensation: Unlike other states, Texas does not require most private employers to carry workers’ comp insurance. However, having this coverage can protect your business from potential liability in the event of workplace injuries.

Leveraging Technology and Tools

Running a business efficiently requires the right technology and tools to streamline operations, track performance, and manage employees. Although every business’s needs differ, some helpful platforms include:

• • Google Analytics: Understand your customers’ online behavior and track website traffic to optimize marketing efforts and make data-driven decisions.
  • Homebase: A powerful tool for employee scheduling, payroll, and time tracking, perfect for small businesses managing hourly workers.
  • QuickBooks: Helps businesses track expenses, manage invoices, and simplify tax reporting.

Investing in the right technology early on can increase efficiency, reduce costs, and help scale your business faster.

Conclusion

Starting a business in Texas is an exciting opportunity, but success depends on careful planning, smart financial decisions, and efficient operations. Choosing the right business structure, securing funding, staying compliant with regulations, and leveraging technology can help you set a strong foundation. The key is to stay flexible, adapt to challenges, and make strategic moves that position your business for long-term growth.

Fast, Flexible Funding for Texas Businesses

Traditional loans aren’t always an option for new businesses, but that doesn’t mean funding has to be a roadblock. Mantis Funding provides revenue-based financing designed to give Texas business owners the capital they need without the hassle of strict loan or credit requirements.

If you’re ready to invest in growth, expand operations, or cover day-to-day expenses, we’re here to help. Contact us or apply today to get the funding your business needs to succeed.